Proceedings of the German Development Economics Conference, Hannover 2010 45

Abstract:

Investment in infrastructure is considered as a crucial prerequisite for economic development. Given the scarce resources for public investment in developing countries a detailed perspective on the effects of each form of infrastructure is needed. This paper focuses on transport infrastructure in Africa. The effects of better and longer roads are investigated in a theoretical model, an empirical setup and in a Computable General Equilibrium (CGS) model. The effects on production, consumption and income distribution are shown. Most importantly the model is used to investigate the effect of roads on the economic participation of rural households. The presented CGE model may be used as a toolkit for the investigation of different policy scenarios concerning the type and volume of investment as well as the possible financing alternatives. Robustness checks show that in order to prevent reliable quantitative results much more information is needed about the exact value of particular parameters in the model.